MR. DAVID GREGORY: Our issues this Sunday: The holiday week provides little relief from a crowded inbox of problems for the new president. While Mr. Obama enjoys his popularity at home and star status abroad, his political critics question whether he has the toughness to conquer the mounting threats across the globe: North Korea, Iran, Afghanistan, Pakistan and Iraq. Insights and analysis this morning from Jeffrey Goldberg, national correspondent for The Atlantic; Michele Norris, host of NPR's "All Things Considered"; Robin Wright, author of "Dreams and Shadows: The Future of the Middle East"; and Byron York, chief political correspondent for The Washington Examiner.

Then, has the economy hit bottom?

(Videotape)

PRES. BARACK OBAMA: What you're starting to see is glimmers of hope across the economy.

(End videotape)

MR. GREGORY: An uptick in the market, some positive earnings news, but what does it mean for Americans out of work or fearful about their jobs? Joining us, two men who get back to the basics of this financial crisis: National Public Radio's "Planet Money" team, Alex Blumberg and Adam Davidson.

But first, the standoff between heavily armed Somali pirates holding American sea Captain Richard Phillips and the U.S. Navy has escalated. As the showdown reaches its fifth day, the pirates opened fire on a small Navy vessel that attempted to approach the lifeboat yesterday. With us for the very latest, NBC News Pentagon correspondent Jim Miklaszewski and the chief executive officer of the U.S. Naval Institute, Major General Tom Wilkerson.

Welcome to both of you. Mik, what is the very latest?

MR. JIM MIKLASZEWSKI: Well, the very latest, David, is that the pirates, the four pirates that are holding Captain Richard Phillips hostage aboard that lifeboat, the standoff continues between them and several U.S. Navy warships. The disturbing thing about that shooting incident last night, while none of the sailors were hit, after all this time locked up aboard that lifeboat it proves that those pirates still have some fight left in them. Also, what was remarkable to me yesterday was the revelation that the lifeboat is now only 20 miles off the shores of Somalia. That puts them dangerously close to getting on shore with their hostage, Captain Phillips, and that's the last thing the U.S. Navy wants to allow them to do. So what's probably going to happen is the U.S. warships are going to try to jockey themselves, position themselves between the lifeboat, the four pirates and the hostage, and the shore to make sure that doesn't happen.

MR. GREGORY: Now, the Maersk, which was the actual vessel--the cargo ship which Captain Phillips was at the helm of, did reach port in Mombasa. That crew's safe, now being interviewed by the FBI. That's the next step here.

MR. MIKLASZEWSKI: That's right. And when the Maersk Alabama pulled in, the FBI declared it a crime scene. So that ship, that crew are on lockdown for the next several days so the FBI can get on with their investigation. After all, this is--technically it's not a military issue, it's a law enforcement issue. But what it does do is delay the return of those 19 remaining American sailors home.

MR. GREGORY: General Wilkerson, let's have a look at the actual lifeboat that we're talking about, because it's not what you would imagine or what you see in the movies. This is actually a picture of what it looks like. It's a self-contained steel hull, I believe, and it has some Plexiglas on it so you avoid exposure. Describe what it must be like out there. You've got both the pirates and Captain Phillips on board. This is why it seems like the Navy wants to really wait them out.

MAJ. GEN. TOM WILKERSON (Retired): Well, there's five people inside. It's completely sealed. If it were to turn over, it automatically can right itself. It has all of the necessary survival mechanism--food, water, shelter--and so it's almost an insulated entity and it's very difficult to get at it. So you need to wait it out a little bit.

MR. GREGORY: And they're not being allowed to get any fuel, so they're not going anywhere.

MAJ. GEN. WILKERSON: No, no. They will run out of fuel...

MR. GREGORY: Right.

MAJ. GEN. WILKERSON: ...perhaps more quickly than they'll run out of anything else. But the drifting tide moving them closer to shore, that's got to be a question.

MR. GREGORY: I think a lot of people who've been following this this week say how is it that this can happen, that you can have this ragtag group of pirates with AK-47s and rocket-propelled grenades or other weapons that they've got...

MAJ. GEN. WILKERSON: That's right.

MR. GREGORY: ...how can they take a cargo ship like this and now be locked in a standoff with the most powerful navy in the world and still be sort of dictating the tempo here?

MAJ. GEN. WILKERSON: They dictated the tempo from the outset, and that's one of the problems with the current mission. The mission that the combined task force has been assigned is virtually mission impossible. The range of the size of the scope of the, of the area in which they have to operate, the number of vessels, allow the pirates to say when they're going to attack, where they're going to attack and who they're going to attack. And the end result is they're dictating the action, and the United States Navy and all of the combined forces are just reacting. And they'll continue to react as long as it focuses on doing things on the water.

MR. GREGORY: Mik, you've been reporting the story for several months now. Earlier this year you were actually in the Gulf of Aden with the U.S. Navy. We have some pictures of you reporting from that period of time. You've seen the real scope of how difficult the problem is, because the area is just huge. As you look at the Navy assets that are deployed from your reporting, and then we can actually show a map of what we're talking about there so people can get a sense of the overall area here off of Somalia where the ship was actually hijacked. That's the Maersk Alabama and now that lifeboat drifting toward the shore. This is the equivalent of the Eastern seaboard, is it not?

MR. MIKLASZEWSKI: Oh, and--absolutely, David. And when you're on a ship or in a helicopter, all you see 360 degrees is water that goes on forever.

MAJ. GEN. WILKERSON: Yes.

MR. MIKLASZEWSKI: The Navy will tell you that the area they're trying to patrol with at any given time may be a dozen, maybe 14, 16 coalition warships is 1.1 square--million square miles. And one of the most effective strategies that the Navy and the coalition employed was to channel most of the ship traffic into a very narrow passageway. And when you sat there and looked at--it looked like I-95 during rush hour, so many ships passing each other going in opposition directions. But they were together, safety in numbers, and often escorted by a warship. So what did these pirates do? When they attacked the Maersk Alabama, the nearest American warship was 350 miles away. It took them more than a day to get to that scene. And what's really disturbing about the attack on the Maersk Alabama, I think, is that the crew aboard did everything right. They were, they were proceeding at a brisk pace.

MR. GREGORY: Right.

MR. MIKLASZEWSKI: When the pirates first attacked, the crew went at them with fire hoses. The pirates retreated but then came back the next day, and the first thing they did was start firing at the bridge with AK-47s.

MR. GREGORY: It--right.

MR. MIKLASZEWSKI: So there appears to be an escalation of force on the part of the pirates, and that just increases the danger, obviously.

MR. GREGORY: Should these crews be armed?

MR. MIKLASZEWSKI: Well, you know, the shipping companies will tell you that they don't want to arm their crews because it raises the risk of escalation of force. It also raises their liability through the roof--liability insurance through the roof. And, and quite frankly, I was told that shortly after the Maersk Alabama was taken the shipping company officials let the military know that, "Look, we know this is a dangerous situation, but we are willing to negotiate, pay the ransom and move on."

MR. MIKLASZEWSKI: And that's what so many of these pirates count on, that they are not going to meet resistance, that they'll hold the ship for several days and then reap their $1, $2, as high as $3 million in ransom.

MR. GREGORY: General, you've made the point that we're talking about piracy on the high seas, but what we're really talking about is a failed state in Somalia.

MAJ. GEN. WILKERSON: And you're...

MR. GREGORY: From, from where these pirates, these criminals can really move around with impunity.

MAJ. GEN. WILKERSON: What we're talking about is a safe haven. And history, our own history will show you that as long as pirates or some enemy of ours have a safe haven, then they get to dictate the course of the action. And Mik's point was well taken; as soon as we began to do convoying or have a narrow lane of transition, the pirates get a vote, too, and they said, "Right, we'll go somewhere else."

MR. GREGORY: Mm-hmm.

MAJ. GEN. WILKERSON: "And when we do, we'll continue to operate." Two hundred and fifty-some hostages, 66 vessels this year, $80 million, roughly, last year in ransom. All that tells you is they have no incentives to stop right now.

MR. GREGORY: And so what's the endgame? We haven't heard from President Obama on this. The administration has let this maritime group, the interagency work go forward. Is this a larger threat? How does it get prevented?

MAJ. GEN. WILKERSON: It's not necessarily a threat, but there's always, as you know living in this city, there's the deal of perceptions. And the perception is the most powerful military nation in the world is, is unable to counter a bunch of thugs on the high seas. And there's something underlying that, too, which is there is a very real terrorist threat growing in Somalia for the very same reasons you brought out, David. It's not governed well, so you can grow whatever you want to grow. The end result is the president has some challenges, because the mission he's given everyone today is not working. And whatever he decides, even if it's to do nothing, it ends up being a decision and there are ramifications about it.

MR. GREGORY: Mik, what's the endgame here? How, how does the administration hope this gets resolved?

MR. MIKLASZEWSKI: Well, the U.S. military will tell you they can't do it alone. They, they in fact have plans, military plans drawn out to go on shore and take care of some of these pirates, to eliminate some of those pirate camps onshore. But then there's the "what next" factor. And they just don't think that at this point, that with two wars in Iraq and Afghanistan, that the Obama administration, the civilian leadership is willing to take that step. And, and as I said, the military is not exactly sure what would be the endgame there. And it's going to take a, an international effort to try to stabilize Somalia, but nobody seems willing to even approach that right now.

MR. MIKLASZEWSKI: And for the terrorist connection, U.S. military and intelligence officials tell us there appears to be no link between the pirates themselves, who in the off-season are fishermen and, and, and belong to tribal groups, and terrorist organizations. But they're keeping a close eye on that to see any kind of nexus there.

MR. GREGORY: And for these pirates themselves, the goal here, get them to Kenya, right, where they could actually be jailed and prosecuted. Is that the thought?

MR. MIKLASZEWSKI: Well, the United States has an agreement with the Kenya government that if they pick up pirates and have enough evidence--this is, after all, a, a law enforcement issue, and on each of these warships they have civilian Navy criminal investigative officers to preserve the chain of evidence so that those pirates can be taken into court. But so far, so far, there's only been a handful of pirates that have actually been captured and put into the Kenyan justice system.

MR. GREGORY: Final point, quickly.

MAJ. GEN. WILKERSON: And therein is the problem. We need a two-track strategy. We've got to built a, a decent government in Somalia that can govern, but at the same time, if you allow the pilots sanctuary, then what you're really saying is they can continue to conduct operations.

MR. GREGORY: All right, we'll leave it there. Obviously, our thoughts and prayers with Captain Phillips and his family, particularly on this Easter Sunday. Thank you both very much.

Coming next, how has the Obama administration fared on crucial foreign policy tests abroad and under political scrutiny back home? Our roundtable weighs in this morning: Jeffrey Goldberg, Michele Norris, Robin Wright and Byron York coming up next.

(Announcements)

MR. GREGORY: World hot spots on the president's desk. Our roundtable when we return in just a moment.

MR. GREGORY: And we are back, joined now by Byron York, Michele Norris, Robin Wright and Jeffrey Goldberg.

Welcome to all of you. Happy Passover, happy Easter.

These tests, Robin Wright, that the president now faces, and you talk about the piracy issue off Somalia, just one of, of a few international tests here that are very difficult to deal with, where there are not ready solutions for the president.

MS. ROBIN WRIGHT: Absolutely. And who would've thought that Barack Obama in the 21st century would face the same kind of challenge that Thomas Jefferson did 200 years ago in defining his own foreign policy? We're all looking for what is the Obama doctrine. And as he faces--whether it's North Korea, where he's fallen short of getting the kind of punitive action from the United Nations, whether it's Iran, where he's not getting the kind of response that he'd hoped for yet, or the Somali pirates, this is a time that's a real test. And I think it's going to be increasingly difficult over the next six months for this president.

MR. GREGORY: Jeffrey Goldberg, you, you've made the point here--you talk about the Somali pirates--this is asymmetric warfare. Here we have this small, almost dinghylike lifeboat being surrounded by U.S. Navy warships and helicopters, and yet, you know, even when they send out a small boat the pirates fire and they, and they retreat. It's a very difficult situation.

MR. JEFFREY GOLDBERG: It's amazing. The United States Navy, the greatest navy in the history of the world, has about 283 ships. Three or four of them now are chasing after a lifeboat off Somalia. It's really an incredible situation. But the really incredible part is, is the thread that connects this to Afghanistan and to Iraq. It's this point about asymmetric warfare. You have, you have a U.S. Army that's been fought to a standstill in Afghanistan by people who are functional illiterates with rusting AK-47s. You have pirates holding the United States Navy at bay in, in--off Somalia. It's really, it's really goes to this point about what Secretary of Defense Gates is talking about, about hybrid warfare, about reengineering the Pentagon to deal with these essentially 19th century kind of threats at the same time that it has to deal with 21st century threats in the form of North Korean missiles and the Iranian nuclear program. It's a very, very challenging time right now for the Obama administration.

MR. GREGORY: And, and, Byron, Robin mentioned North Korea. Just a week ago while in Prague, after the North Koreans fired off that missile, President Obama responded and responded forcefully. This is what he said.

(Videotape, Sunday)

PRES. OBAMA: Rules must be binding. Violations must be punished. Words must mean something. Now is the time for a strong international response.

(End videotape)

MR. GREGORY: And yet one week later, what has he got by way of a strong international response?

MR. BYRON YORK: He's got nothing so far. There's been a daily show at the State Department press briefing in which reporters say, "Anything new from the United Nations on North Korea?" And they say, "No, we're working on it." "Do you expect a resolution?" "Well, we hope to get a strong response of some sort." "Are you confident?" "Well, we're hopeful. We're, you know, optimistic." So he hasn't gotten anything. But, you know, there is a U.N. resolution that passed in 2006 about North Korea, in which the Security Council demanded that North Korea not conduct any launch of a ballistic missile and abandon its ballistic missile program in a complete, verifiable and irreversible manner. And if you cannot get another resolution saying that this launch of a ballistic missile violated that, I mean, it--we're in a very tough spot.

MR. GREGORY: And, Michele, you have North Korea, Somali pirates, Iran, which we'll speak about in more detail in just a moment. Is this president being tested?

MS. MICHELE NORRIS: Oh, yes. Every day. Every day. I mean, and one of the big tests is whether he will show--whether he will demonstrate through the decisions that he's making and the actions that he's taking that there are clear consequences when people violate the international rule of law.

Now, on Korea, the administration will say that they have made some progress here, that--and that you'll start to see that next week; that China and Russia didn't even agree that North Korea had violated international airspace by launching this--whether you call it a satellite or a missile or a rocket. They're saying now that there has been some movement--short of a resolution, but binding--that would lead to further military or financial sanctions for North Korea. But if past is prologue, sanctions don't really hold much utility in dealing with North Korea. So it--you know, it--there's a test in North Korea, there's a test in Iran and there's a clear test in, in Somalia in whether they will walk softly and carry the stick.

MR. GREGORY: Right.

MS. NORRIS: The question is how big is that stick, and are they willing to use that stick?

MR. GREGORY: Well, and, and if we stay with the axis--which President Bush called the "axis of evil," and we talk about Iran; also this week, after North Korea, you had President Mahmoud Ahmadinejad boasting of an enhanced capacity to enrich uraniun--uranium in, in, in pursuit, the U.S. believes, of a, of a nuclear weapons program. The Economist wrote this about the criticism of this administration: "The conservative critique," the magazine writes, "of Mr. Obama is that he is Jimmy Carter redux: a woolly idealist who thinks he can sweet-talk bad guys into behaving. While he pursues talks with Iran, Republicans fret, Iran's leaders chuckle behind their beards and carry on enriching uranium."

Jeffrey Goldberg, there is this discussion about discussions between the administration and Iran.

MR. GOLDBERG: Oh, to be fair, I think the Iranian mullahs were chuckling behind their beards during the Bush administration as well. It took a long time to get to this point. But, but the, the truth is is that, is that--I think Robin referred to this already--this administration has not gotten the response yet that it wants from Iran. All it's gotten is some very nervous allies in the region. This is an important point. I mean, this, this holds true, by the way, in North Korea. The Obama administration's response so far is making Japan and South Korea a little bit nervous. In the Middle East the Obama administration's somewhat tentative approaches so far have, have made Israel nervous, but also Egypt and the United Arab Emirates, Jordan. All of our allies are wondering, "OK, how far do you go with Iran before you get the message that Iran doesn't really want to play? What it wants is to develop a nuclear weapon."

MR. GREGORY: And when--there's, there's a question about how tough this president will be in dealing with some of these problems. And Jeffrey references Israel here, too, and the concern about Iran. Benjamin Netanyahu, the new prime minister in Israel, has made it very clear that Iran is the singular threat in his interview with Jeffrey Goldberg for The Atlantic a couple of weeks ago, and that he is not in sync with the administration on pursuing an independent Palestinian state. Another potential challenge from ally of this administration.

MS. WRIGHT: And this is going to complicate our dealings with Iran. But I think--I've just come back from Iran, and I think for the first time you'll find both the United States and Iran on the same page when it comes to negotiations. In the past, when one side has been interested the other side hasn't. And there is an appetite for moving forward. I think the problem is going to be over the process of uranium enrichment, the fueling--the fuel cycle for a peaceful nuclear energy program that can be subverted to develop the world's deadliest weapon. And the, the Iranians, what they're doing today in enrichment is not actually illegal, it's allowed under the nonproliferation treaty. And I think that the Iranians are signaling in all the talk this week about how far they've gotten in this process that they're posturing an advance of what they believe will be talks with the United States.

MS. WRIGHT: They want the right to enrich uranium. They fear that, that first of all, they think this is an issue of sovereignty. And they also believe that the international community, led by the United States, wants, at some point, to be able to use that fuel cycle down the road to say, "Well, we're going to take it away if you don't cooperate on other issues," that they'll be repeatedly held hostage. And so I think there actually is room for negotiation. The question, of course, is the timetable, and that gets back to your question of what about Israel and Benjamin Netanyahu. And the real challenge is whether we can get something done soon enough with the Iranians to pre-empt the Israelis from taking unilateral action.

MS. NORRIS: David...

MR. GREGORY: Yeah.

MS. NORRIS: ...there's just one other thing, though, if I can just say. It seems that Iran also wants something that it hasn't received in the previous administration, respect. And the--and President Obama, in traveling overseas--language, small gestures carry a lot of weight. And, and Ahmadinejad signaled that in the interview that he did with Der Spiegel this week, where president said Iran is a good civilization. You know, that statement is something that you would never have heard in the previous administration, stark contrast to including Iran in the axis of evil. So, you know, when he says something like that, they, they hear that. And it's a small gesture, but it speaks to the respect that they want.

MR. YORK: Well, you, you talk about nervous allies abroad, he has nervous allies at home, too. At, at the end of March a group of top Democrats in the House--Steny Hoyer, Ike Skelton, the chairmen of the National Security Committees--wrote Obama a letter and said, "Engagement must be serious and credible, but it can't be open-ended." We can't allow Iran to use talks as a stalling method to just--while they continue their nuclear program. There seems to be a consensus that it's fine to go talk, it's fine to change the tone from the previous administration, but you don't have a lot of time and you have to move on to real sanctions.

MR. GOLDBERG: Yeah, yeah, yeah.

MR. GREGORY: Here's my question. The president goes abroad and makes a speech about how we have to rid the world of nuclear weapons, and yet is a negotiation with Iran tantamount to accepting Iran as a nuclear power?

MR. GOLDBERG: Well, this is the fear of the people who are in the Middle East who are worried about the Iranian nuclear program. I mean, talking about what does Iran what, Iran wants respect, it wants to have negotiations, but it also wants to be the leading country in the world of Islam. I mean, this is what you hear from the Arabs over and over again. And when King Abdullah of Jordan comes here in a couple of weeks, he's going to tell the American administration, "You don't understand. Iran is in competition with us, your allies, to, to, to dominate the Muslim world." Iran still has these goals that go broad--that go larger than just Iran's immediate neighborhood. And so you're, you're running into a situation where, yes, Iran understands that in order to be a very powerful country it needs a nuclear program and it needs the capacity to have a nuclear weapon. This is why the, the, the dream of having a nuclear-free world is very nice, but both North Korea and Iran, among other countries, don't want to cooperate.

MR. GREGORY: Right. I want to stay with this issue of, of reaching to Islam more generally, to Arab countries, but to Islamic people around the world, because the president went pretty far in doing that during his recent trip to Europe, and it culminated this week in Turkey. And he spoke to the Turkish parliament on Monday and went farther, certainly, than his predecessor, but pretty far by any measure in that sort of outreach. Let's listen to what he said Monday.

PRES. OBAMA: We will convey our deep appreciation for the Islamic faith, which has done so much over the centuries to shape the world, including in my own country. The United States has been enriched by Muslim-Americans. Many other Americans have Muslims in their families, or have lived in a Muslim majority country. I know because I am one of them.

(End videotape)

MR. GREGORY: Robin Wright, you cannot imagine a candidate Obama saying those, those kinds of things given the flak he took during the campaign. But he's using his political capital now, and it's in furtherance of his foreign policy. A bold step.

MS. WRIGHT: Yes. And there are a lot of indications that he's actually way ahead of the American people on this. There was a poll recently that showed that 55 percent of Americans have an unfavorable view of Islam even though the majority support his outreach. The problem, I think, for Obama is that he thinks--and this was George Bush's problem, too--that words, you know, with--spoken with sincerity are going to appeal to the Islamic world, are going to change public opinion. I think there are a lot of people in the region who really are hopeful that something different is going to happen, but they want to see it in tangible ways. They've gone through so many periods of American pledges of helping with autocratic regimes, helping with economic development, and they still live pretty abysmal lives. And there's something else different happening in the Islamic world today, it's kind of a fourth phase of the Islamic revival, where people are increasingly religious even as they're increasingly anti-jihadist. They're not interested in an Iranian-style theocracy, but they also are not interested in an American-style democracy. And it's going to be hard for the United States to figure out how it fits into this different kind--this evolution in the Islamic revival.

MR. GREGORY: Jeffrey:

MR. GOLDBERG: But this is a very clever thing that President Obama did. I mean, if the goal, the strategic goal is to separate the mass of Muslims from al-Qaeda and its, and its ideology, if going before the Turkish parliament and talking about your respect for Islam is one way to do it, then, then, then more power to him. And I think that, that he, he has the opportunity right now to have this new approach and to isolate al-Qaeda even further than it's already isolated.

MR. GREGORY: The question is whether the new approach is really working, and conservative critics of the president said this was a feel-good tour of Europe. He went out there and said things Europeans want to hear, including being critical not only of his predecessor, President Bush, and his policies, but arrogance, derisiveness, dismissiveness on the part of the United States. Charles Krauthammer wrote this on Friday: "Our president came [to the G-20] bearing a basketful of mea culpas," he writes. "Obama indicted his own people for arrogance, for dismissiveness, for derisiveness, for genocide, for torture, for Hiroshima, for Guantanamo and for insufficient respect for the Muslim world. And what did he get for this obsessive denigration of his own country? He wanted more NATO combat troops in Afghanistan to match the surge of 17,000 Americans. He was rudely rebuffed. He wanted more stimulus spending from Europe. He got nothing. From Russia, he got no help on Iran. From China, he got the blocking of any action on North Korea. And what did he get for Guantanamo? France, population 64 million, will take one prisoner." Byron:

MR. YORK: You know, the, the apology part of the tour really grated on Republican ears really for a couple of reasons. One, it was one way. When the president said the United States has been arrogant, it's been dismissive and derisive, and then he followed that immediately and said that there had been a casual and insidiousness anti-Americanism in Europe. Well, there weren't any European leaders who said, "You know, that's right, we have been anti-American, and insidiously anti-American, and by golly we're going to change." So there was, there was that fact that it wasn't, that it was one way. And the second fact was it was unnecessary. He could've said--he's obviously sending the message that the United States has new leadership, and he could've said, "We look forward to a new foreign policy of engagement with you. We want to listen to you. We want a spirit of cooperation." Everybody would have gotten the message without him buying into the "United States is arrogant" routine.

MR. GREGORY: But the, but the other side of that, Michele, is that sort of candor is a marked departure. And if you want to bring people back into the U.S. fold with the goal of getting them to do something, that maybe that's the necessary approach.

MS. NORRIS: And that's exactly the argument that they make. I mean, they--it's clear in talking to people when they returned from the overseas trip this year that they, they knew what they were saying, they knew that this would inflame the right, but they were looking--they, they--when you talk to them, they said they're taking the long haul here, that they are trying to establish relationships. They're very intent on re-establishing America's place in the world. And they, they say--I was at a, at a dinner with, with a West Wing adviser this week who made it clear that they want to establish an, an--sort of an Obama view of the world, and that the world will take a different view of this administration and the U.S. And in order to do that, they feel that they have to speak with candor, even if it means inflaming the right. And to that extent that it does, they think that that actually helps them...

MS. NORRIS: ...in trying to extend a hand to Europe and to...(unintelligence).

MR. GREGORY: Jeffrey, does that kind of candor then extend--outreach to the Muslim world, does it also then extend to the idea of talking about what's happening in Pakistan, this brutal tale of the 17-year-old girl beaten by a local Taliban commander in, in Pakistan, at a time when there's some discussion of actually sitting down and talking to elements of the Taliban? Do they not have, you know, to--does he not have to take on the, the Muslim world for treatment of women and, and others?

MR. GOLDBERG: Look, I hope that this trip was the first of, of, of many in which he grapples with the issues of the Muslim world. And, and here maybe he's setting, he's setting a new pattern of, of talking, and, and I hope that in, in, in coming trips he, he confronts the Muslim world about some of its dysfunctions, including the, the sort of things that you're talking about in Afghanistan and Pakistan. He can do that if he's won a little bit of trust from the, from the populations of these countries.

MR. GREGORY: He...

MS. NORRIS: And the argument they make is that candor is the only way to earn that trust. That's what they say.

MR. GOLDBERG: You know, here, here's the thing. The ultimate point, though, is, is--and I think that Obama people say this privately, certainly--the ultimate point is, is he's going to be judged ultimately on whether he defends and advances American interests. If he uses bullying to do it, charm, bribery, however, ultimately this is just the first trip, and we'll see in a year or two whether this approach works as opposed to say a Bush approach.

MR. GREGORY: Right. The other major tests, of course, ongoing wars in Afghanistan and Iraq, major new commitment to Afghanistan. Here's the cover of Time magazine, which crystallizes this problem, "How Not To Lose in Afghanistan." It's not just Afghanistan, it what's, what happens in neighboring Pakistan that's so important. And the question of Iraq. There is a deadline that's looming this summer for the withdrawal of combat forces. And yet General Odierno, who is the commander of U.S. forces in Iraq, warned this week that deadlines may not be upheld. This is how The Times of London reported it Thursday: "The activities of al-Qaeda in two of Iraq's most troubled cities would keep the U.S. combat troops engaged beyond the June 30th deadline for their withdrawal, the top U.S. commander in the country has warned. ... General Odierno...said that he was also concerned about the risk of renewed conflict between Arabs and Kurds in northern Iraq, where tensions are rising over the ownership of territory. He also cited the `very dangerous' threat posed by Iranian-funded militants, who appear to be styling themselves on Lebanon's Hezbollah." Robin:

MS. WRIGHT: There are a number of problems in Iraq. One is the--as we've seen in the headlines over the past week, the increase in the number of suicide bombs. We haven't been paying attention, we kind of took for granted that we'd--that had plateaued and was on, on the decline. Then you have the problem that the very people, the Sunnis in the awakening councils, who were so pivotal to our--to the success of the surge, have begun to complain that the government's not including them, that they're not--some of them haven't been paid for three months. We once paid them, the Iraqi government is now supposed to pay them. And that then fuels the danger of Sunni-Shiite tension again. And then you have this looming issue of Kirkuk, the kind of Jerusalem of Iraq, which hasn't voted, has to be settled who controls it, and it's one of the two oil centers in Iraq. So that's a problem. And then you have this, you know, election's coming up in Afghanistan, and you have almost half the districts that are unstable today. And, you know, the danger that even with 30,000 new Americans troops, that how can we provide security?

MR. GREGORY: Right. And, and, Michele, there's the question of political will as well. I mean, I think about that Time cover, "How Not To Lose in Afghanistan." Heretofore it's been known as the forgotten war. What people do think about is Iraq. And in the middle of this global recession, this really struck us this week. Here's the headline from the LA Times: "Iraq war's cost to pass Vietnam's. By year's end it will rise to $694 billion," with this new war supplemental which the administration requested, "making the conflict the most expensive in U.S. history besides World War II." Vietnam at $688 billion.

MS. NORRIS: And the, the contrast between those two wars in interesting, because you talk about political will, you know, in, in actually having to go back and ask for more money to fight these wars, to ramp up the effort in Afghanistan...

MS. NORRIS: ...to decide how to handle the situation in Iraq. The--they will say, both in the Pentagon and the administration, that it's, it is a deadline, but it's also a goal. Our goal was to draw down by June 30. And they'll keep talking about that, because that's the--they, they say that they have to be resolute there. But one of the big differences in terms of political will in comparing Iraq and, and Vietnam is Vietnam is very different. Vietnam touched people's lives in a different way. We had a draft then. The tentacles reached out into every community.

MR. GREGORY: Hm.

MS. NORRIS: Every county, every neighborhood knew somebody that was actually--this is a very, very, very different conflict. And with the economy sort of being front and center in terms of what people are concerned about, it, it's...

MR. GREGORY: Yeah.

MS. NORRIS: When you talk about political will, it's a different--it's much harder to make that point.

MR. GREGORY: I do, I do--I just--I want to, I want to come back to domestic matters with just a few minutes left, and, and get into some of the issues; the economy, the budget, some of these fights that the president's likely to have with Congress, particularly Republicans. Look at this poll from The New York Times this week about the issue of trust. Obama clearly in the driver's seat: 63 percent of Americans think he is the most likely one to make the right decision on the economy as opposed to 20 percent for the Republicans in Congress.

And, Byron, a lot of sentiment that really Republicans are not going to work with this administration on some of these key priorities. Will that lead the administration and the president to think bipartisanship on those efforts are futile? Ron Brownstein, in his column for the National Journal, warns that that would be the wrong conclusion for the administration. He writes this: "November's election results guaranteed that the national debate would shift left. But if Obama accepts the liberal insistence that outreach is futile, and seeks consensus only within his party, he will inevitably produce legislation that reflects the center of his coalition, not the center of the country. Over time, that space can swallow a presidency. Just ask Bush, who decimated Republican support in the electorate's center, partly by governing too often as if he were the president only of Red America."

MR. YORK: Well, I think you can overstate the, the partisan divide here. One, zero Republican votes for the, for the budget in the House or the Senate. Clear differences there. You haven't heard a lot of Republican complaining about the president's escalation of the war in Afghanistan. They, for the most part, support that. So it, it's not as if every issue is that way. But look, Republicans know where they are. They look, look at their, at their polling. They believe that Obama will come to earth at some point. They--the House Republicans did a poll just a couple of days ago, showed 62 percent support for Obama. And then they asked, do you support his health care plan? Didn't say what it was, we don't really know what it is. Fifty-one percent--they just wanted to see what people felt like. They feel that when some big fights come over energy, health care in the summer, that they'll--you know, Obama will be less powerful than he is right now.

MR. GOLDBERG: But, you know, right now, right now they're in a very comfortable place, the Obama administration, I think. I was talking to a senior administration official yesterday about the fight between Biden and, and Rove, and, and this person said, "You know what, Rove as the, as the picture of the Republican Party, as the spokesman for the Republican Party, that's a place where we want to be." And, and, and right now they're, they're comfortable, they're comfortable with, with who the Republican leaders are and their, and their numbers. Byron's right, it gets more difficult as, as things move along, but the Republicans are in a pretty debased position right now.

MR. GREGORY: But it strikes me, Michele, what's interesting is that even as former senior adviser to President Bush Karl Rove, taking on Vice President Biden--and also other Bush advisers who are really hitting back hard, saying that the president's been unfair going overseas, really taking shots at the former president and his policies. While they do that, they might also be stressing that there are real areas of agreement in, in areas of civil liberties, national security, where there are agreement, agreements with the previous administration.

MS. NORRIS: What, what you hear on that side, when people are making--when people from the previous administration are making these statements, is that effort, it seems like an early effort to sort of reshape the Bush legacy.

MR. GREGORY: Right.

MS. NORRIS: But they're--Byron is absolutely right, the--about the way the tone may shift in Washington. And if--one thing we know is that the popularity that the president has, to the extent that he has any going into the early stages of, of the administration, will start to wane in about eight months.

MR. GREGORY: Right.

MS. NORRIS: And at that point, even though the Obama administration seems to be backing out--backing up from this bipartisanship that they professed at the beginning of the administration...

MR. GREGORY: Right.

MS. NORRIS: ...they may start to pull back to the table at that point because they are going to need to reach across, particularly on health care.

MR. GREGORY: All right.

MS. NORRIS: Which, which they just are, are going to need to have some sort of relationship with people on the other side of the aisle if they hope to achieve that goal.

MR. GREGORY: Before we go, other breaking news out of the White House according to The Washington Post today, and that is finally, at long last, the arrival of the first puppy. And there's the picture as reported by The Washington Post, complete with a lei. That is Bo, the new Portuguese Water Dog. It's supposed to be officially unveiled, I think, on Tuesday, and there was the official homecoming picture. So now finally we can put this issue to rest.

MR. BLUMBERG: I mean, you know, like sort of the thing that is at the very center of this financial crisis is something called a collateralized debt obligation, and I could explain it to you right now, it would take literally probably an hour.

MR. GREGORY: Right.

MR. BLUMBERG: And, you know, it would be--you know, nobody wanted to do that.

MR. GREGORY: And why is it, why is it that this is so complex, so difficult for people to understand?

MR. DAVIDSON: Well, I think this crisis is made up of so many discrete parts, each one of which is sort of its own little world. You know, the financial markets, the weird corners of the financial markets, politics, international relations, our own personal consumption patterns. And I think what Alex and I have tried to do is place it all in a narrative to tell a story that, that helps people understand where each of those pieces fit in with all the other pieces. But that--it is hard, and it, and it's hard in our profession to get the time and the space to do it.

MR. GREGORY: Right. As a matter--one of the specials you've done for "This American Life" is called "The Giant Pool of Money," and you tell a story that really is indicative. And if easy credit is one of the main pillars of this financial crisis, you talk about a guy named Clarence Nathan. Three part-time, not very steady jobs making about $45,000 a year, and yet...

MR. BLUMBERG: He got a loan from a mortgage broker, you know, without--and they didn't even ask him if he had a job.

MR. GREGORY: Even he was surprised that he would qualify for a loan like this.

MR. BLUMBERG: Right.

MR. DAVIDSON: He said he wouldn't give himself that loan, no one he knows would give him that loan. He said he has friends who are criminals, who'll break your kneecaps who wouldn't have given him that much money. And what we loved about Clarence is he, he really recognized that this was not him being a victim of a bank or the bank being a victim of him. The way he put it is, "The two of us were together in this. I took an imprudent loan, they made an imprudent loan. We were partners."

MR. GREGORY: Hm.

MR. DAVIDSON: And I think that really gets at the heart of the crisis.

MR. GREGORY: So let's talk about where we are. There was some positive news this week. Markets up a bit, Wells Fargo reported earnings in the first quarter, other banks will come out with some of their earnings as well. Both Larry Summers, top economic adviser to the president, and the president himself spoke about where we are. Let's listen to that this week.

(Videotape, Wednesday)

MR. LARRY SUMMERS: So I think the sense of a ball falling off a table, which is what the economy has felt like since the middle of last, since the middle of last fall, I think that is going to--I think we can be reasonably confident that that's going to end within the next few months, and that you'll no longer have that sense of free fall.

(End videotape)

(Videotape, Friday)

PRES. OBAMA: What we've seen is mortgage interest rates go down to historic lows, and we've seen a very significant pickup in refinancings. That has the effect of not only putting money in the pockets of people, but also contributing to stabilization of the housing market. What you're starting to see is glimmers of hope across the economy.

MR. DAVIDSON: I think that both of them were pretty restrained in what they said, and both of them pointed out this economy--yes, this--there's a lot of good news this week relative to all the horrible news we've had for weeks and weeks and months. But to place that in context, this economy right now is, is an arm of the U.S. government. The U.S. government is pending hundreds of billions, trillions of dollars pushing mortgage rates down, getting your credit card rates and my credit card rates cheaper than they would be otherwise, getting it easier for us to get auto loans. The president's become a mortgage pitchman. And all that activity, all this unprecedented historic activity has stopped the free--slowed won the free fall. So look, we like to stay optimistic. There will be weeks that are really good, there will be months that are good.

MR. GREGORY: Mm-hmm.

MR. DAVIDSON: There's going to be years that are good. But they're a ways away. We have--we are, we are not there yet. We're probably a year away at least.

MR. GREGORY: And, and the big fear--right, that's important, whether it's going to happen, you know, by the end of this year. Even if there is some sign of recovery by the end of the year, a lot of people say, "OK, what about my job? Am I still going to lose my job?" Are we going to get unemployment reaching double-digits here?

MR. BLUMBERG: I mean, some predictions say that. And, and the thing about unemployment, I mean, that's what it's all about, right? Like, that's what the--you know, who cares about GDP if nobody can find a job? And so--and that's, that's considered a lagging indicator. So it's possible that, like, you know, sort of technically the economy could turn the corner, but unemployment might still be rising. And it's just--it's hard, it's hard to say where--how far it's going to go up.

MR. GREGORY: Let's talk about the banks, because the banks are the subject of so much anger around the country. And of course they're vitally important because unless there's lending going on, that's really the fuel of the economy, at--of entrepreneurship in a community to, to even that macro country level. This is what The New York Times reported about these stress tests that are under way: "The banking industry, broadly speaking, seems to be in better shape than many people think, officials involved in the examinations say. That is the good news. The bad news is that many of the largest American lenders, despite all those bailouts, probably need to be bailed out again either by private investors or, more likely, the federal government. After receiving many millions, and in some cases, many billions of taxpayers dollars, banks still need more capital, these officials say." You're not going to find a lot of love out there for the banks in this country. Are they going to need more money?

MR. DAVIDSON: Oh, definitely. We probably have something like 8,000 banks in this country, and most of them, the vast majority are doing OK. But only a small number are in serious trouble. But here's the problem. The small number that are in serious trouble are so big they make up 40 percent, 50 percent, maybe 80 percent of our banking system. So, so the number of banks is not the issue, it's the size of the banking system overall. And it seems very possible that today, right now our banking system overall is effectively insolvent.

MR. GREGORY: And what does that mean? Because banks are making money. You hear about Wells Fargo; JPMorgan is one of the healthier banks. You know, there is lending going on. So what does that mean, that they're insolvent?

MR. BLUMBERG: Well, I mean, technically, if you think of, like, basically at its most basic--I'm a bank. I borrow $100 from you, I loan it to somebody else to buy a house, say a $100 house. They--that person loses their job, they stop paying me back. The housing market turns down. I have the house, it's worth $70, and I can't pay my $100 back. And that is like--at its most basic, that's what it means to be an insolvent bank. I've borrowed money and I cannot pay it back. And as the, as the government, basically you have two options when, when you're, when you're faced with an insolvent banking system. We can do what we did with the savings and loan crisis, which is you go in, you identify which ones are insolvent, you come in, take them over, sell them to a, a healthy bank. Or we can do what we did during the Latin American debt crisis, which most people haven't heard of, and that is because banks made a bunch of loans to Latin American countries, they couldn't pay them back, and so what the government did is they said basically, we'll just keep that a secret for right now and let you earn your way out of it.

MR. BLUMBERG: And that seems to be what the Obama administration might be doing right now.

MR. GREGORY: And that's, that's the thing about risk, how much risk there is right now for the taxpayer.

MR. BLUMBERG: Hm.

MR. GREGORY: Everybody is up in arms about those AIG bonuses of $165 million. You guys make a point when you're out there in your reporting, but also in your discussion, saying if you really knew, if you really did understand this, you'd be even angrier.

MR. DAVIDSON: Yeah.

MR. GREGORY: Why? Why do you say that?

MR. DAVIDSON: Yeah. I mean, for us this $165 million, it's so nothing. The entire financial system of the United States is being subsidized by taxpayers. Now, I'm going to say that might be the right thing to do. I'm not a populist, I'm not saying that's horrible. But I think it's politically really, really dangerous. Just about every single person in America who makes bonuses in the financial services sector is getting a higher bonus than they would otherwise because of the taxpayer subsidy. That might be the right choice to make by the government. They might--we might all need them to do that. But there is a massive, massive subsidization of basically the--one of the richest industries in our country, and in the industry that caused the problem.

MR. GREGORY: And yet there's this in The New York Times today. The lead story: "Crisis Reshaping Wall Street as Stars Begin to Scatter." The article points out there's an air of exodus on Wall Street, not just among those being fired; as Washington cracks down on compensation, tightens the regulation of banks, a brain drain is occurring at some of the biggest ones. They are some of the same banks blamed for setting off the worst downward spiral since the Depression. Is there a real fear that because of regulation and competition that Wall Street will effectively not be the same, and the economy would suffer for that?

MR. BLUMBERG: Well, there's, there is a real fear that Wall Street will not be the same. I think that's almost a given.

MR. BLUMBERG: I think Wall Street will not be the same. Will the economy suffer because of that? That is the big question. And, and for, for many, many years, there was this belief that, you know, as--what Wall Street was doing was creating value.

MR. GREGORY: Right.

MR. BLUMBERG: Now it's sort of--with, with this current, with this current crisis, it's, it's--that's coming into question.

MR. GREGORY: And, Adam, you talk about subsidizing the, the U.S. economy and the financial system. It's also really important to point out that in the, in the course of this, the Treasury Department reported Friday the deficit has now reached nearly a trillion dollars for the first half of the 2009 fiscal year. This deficit picture and then the total debt picture is really worrisome for the future of this economy.

MR. DAVIDSON: Yeah. The--before this crisis began our debt picture was, I don't have the numbers in my--exactly, but it was around 45 percent of GDP, say. And at the end of this crisis we're probably going to get in the 70s, 70 percent or so GDP. Now, we know that countries that get to 100 percent of GDP--Argentina, Greece, Iceland, which was way above--that is very unstable. That's really, really dangerous. We know that we can sustain 45 percent. We're going to be somewhere in the middle. And there's no magic number. We don't know where it gets dangerous.

MR. GREGORY: Right.

MR. DAVIDSON: We know we're heading in the that direction, hopefully we'll stay on that side of it.

MR. GREGORY: And we also know that higher interest rates, which are associated with more debt, the old expression, "Money makes the world go around," well, money moves more slowly when the rates are higher to, to borrow the money.

MR. BLUMBERG: Mm-hmm.

MR. GREGORY: That has a real impact on the economy.

MR. DAVIDSON: Right. I mean, right now the U.S. government has this incredible gift, which is that the rest of the world and basically everyone's so freaked out about the banking system...

MR. DAVIDSON: ...that they're basically lending money to the U.S. government for free. At some point that's going to end, and that's terrifying.

MR. GREGORY: That's...(unintelligible). All right. Well, thank you both. It's certainly a conversation to be continued.

And we are going to continue our discussion online, and ask Alex and Adam some questions that our viewers have submitted via e-mail and Twitter. Watch our MEET THE PRESS Take Two Web extra. It's up this afternoon on our Web site. Plus, look for updates from me throughout the week. It's all at mtp.msnbc.com.

And we'll be right back.

(Announcements)

MR. GREGORY: That's all for today. Happy Passover and a very happy Easter as well. We'll be back next week. If it's Sunday, it's MEET THE PRESS.